Question

In: Finance

You are considering a new project that requires $300,000 investment in a machine, including installation and...

You are considering a new project that requires $300,000 investment in a machine, including installation and shipping cost. The life of the machine is three years, and it depreciates via 3-year MACRS methods (33.33%, 44.45%, 14.81%, and 7.41%). If you operate this project, the annual sales of the firm increases by $250,000 a year, and the annual operating expense increased by $100,000. The firm has a marginal tax rate of 34%. In order to start the project, the firm has to invest $30,000 in working capital, which will be fully recaptured at the end of the project.. The expected market value of the machine is $50,000 in three years when the project is terminated. What is the terminal cash flow of this project? Round to the nearest penny. Do not include a dollar sign in your answer.

Solutions

Expert Solution

jeff jeffy answered 10 months ago
Next > < Previous

Related Solutions

A firm is considering a project that requires an initial investment of $300,000 in new equipment,...
A firm is considering a project that requires an initial investment of $300,000 in new equipment, which has a five-year life and a CCA rate of 30 percent. An initial investment in raw materials inventory of $50,000 is also required to support the project, which will rise to 15 percent of sales. The project will generate sales revenue of $400,000 in the first year, which will grow at 4 percent per year. Variable costs will be $220,000 for the first...
A 5-year project requires a $300,000 investment in a machine that is expected to worth $50,000...
A 5-year project requires a $300,000 investment in a machine that is expected to worth $50,000 when the project ends. Operating expenses are expected to be $75,000 in the first year and are expected to increase 3% per year over the life of the project. The appropriate discount rate is 8%, the company’s tax rate is 20%, and the CCA rate is 30%. What amount would you use for salvage value in your NPV calculation
A 5-year project requires a $300,000 investment in a machine that is expected to worth $50,000...
A 5-year project requires a $300,000 investment in a machine that is expected to worth $50,000 when the project ends. Operating expenses are expected to be $75,000 in the first year and are expected to increase 3% per year over the life of the project. The appropriate discount rate is 8%, the company’s tax rate is 20%, and the CCA rate is 30%. What is the after-tax present value of the annual operating expenses? (Do not round intermediate calculations. Round...
A 5-year project requires a $300,000 investment in a machine that is expected to worth $50,000...
A 5-year project requires a $300,000 investment in a machine that is expected to worth $50,000 when the project ends. Operating expenses are expected to be $75,000 in the first year and are expected to increase 3% per year over the life of the project. The appropriate discount rate is 8%, the company’s tax rate is 20%, and the CCA rate is 30%. What amount would you use for salvage value in your NPV calculation?
A 5-year project requires a $300,000 investment in a machine that is expected to worth $50,000...
A 5-year project requires a $300,000 investment in a machine that is expected to worth $50,000 when the project ends. Operating expenses are expected to be $75,000 in the first year and are expected to increase 3% per year over the life of the project. The appropriate discount rate is 8%, the company’s tax rate is 20%, and the CCA rate is 30%. What is the present value of the CCA tax shield? (Do not round intermediate calculations. Round the...
Kentucky Hardware Company (KHC) is considering an investment project that requires a new machine for producing...
Kentucky Hardware Company (KHC) is considering an investment project that requires a new machine for producing special tools. This new machine costs $900,000 and will be depreciated over 5 years on a straight-line basis toward zero salvage value. KHC paid a consulting company $50,000 last year to help them decide whether there is sufficient demand for the special tools. In addition to the investment on the machine, KHC also invests $40,000 in net working capital. The company pays $58,800 in...
Kentucky Hardware Company (KHC) is considering an investment project that requires a new machine for producing...
Kentucky Hardware Company (KHC) is considering an investment project that requires a new machine for producing special tools.  This new machine costs $1,000,000 and will be depreciated over 10 years on a straight-line basis toward zero salvage value.  KHC paid a consulting company $50,000 last year to help them decide whether there is sufficient demand for the special tools.  In addition to the investment on the machine, KHC also invests $30,000 in net working capital.  The company pays $45,000 in interest expenses annually.  KHC has...
Cheetah Copy purchased a new copy machine. The new machine cost $110,000 including installation. The company...
Cheetah Copy purchased a new copy machine. The new machine cost $110,000 including installation. The company estimates the equipment will have a residual value of $27,500. Cheetah Copy also estimates it will use the machine for four years or about 8,000 total hours. Actual use per year was as follows: Year Hours Used 1 2,000 2 1,600 3 2,000 4 3,200 1. Prepare a depreciation schedule for four years using the straight-line method. (Do not round your intermediate calculations.) 2....
Cheetah Copy purchased a new copy machine. The new machine cost $136,000 including installation. The company...
Cheetah Copy purchased a new copy machine. The new machine cost $136,000 including installation. The company estimates the equipment will have a residual value of $34,000. Cheetah Copy also estimates it will use the machine for four years or about 8,000 total hours. Actual use per year was as follows: Year Hours Used 1 2,900 2 1,900 3 1,900 4 3,500 2. Prepare a depreciation schedule for four years using the double-declining-balance method. CHEETAH COPY Depreciation Schedule—Double-Declining-Balance End of Year...
Cheetah Copy purchased a new copy machine. The new machine cost $114,000 including installation. The company...
Cheetah Copy purchased a new copy machine. The new machine cost $114,000 including installation. The company estimates the equipment will have a residual value of $28,500. Cheetah Copy also estimates it will use the machine for four years or about 8,000 total hours. Actual use per year was as follows: Year Hours Used 1 2,000 2 2,000 3 2,000 4 3,200 2. Prepare a depreciation schedule for four years using the double-declining-balance method. (Hint: The asset will be depreciated in...
ADVERTISEMENT
Subjects
ADVERTISEMENT
Latest Questions
ADVERTISEMENT